Industra/Matrix Venture v. Pope & Talbot

Decision Date08 September 2006
Docket NumberCC 0112-12723.,CA A121936.,SC S52674.
Citation341 Or. 321,142 P.3d 1044
PartiesINDUSTRA/MATRIX JOINT VENTURE, an Oregon joint venture, a/b/n of Matrix Service, Inc., Respondent on Review, v. POPE & TALBOT, INC., an Oregon corporation, Petitioner on Review.
CourtOregon Supreme Court

Guy A. Randles, of Stoel Rives LLP, Portland, argued the cause and filed the brief for petitioner on review. With him on the brief was Charles F. Adams.

Julia E. Markley, of Perkins Coie LLP, Portland, argued the cause and filed the brief for respondent on review. With her on the brief were Michael H. Simon, of Perkins Coie LLP, and Rodney R. Mills and Daniel Gragg, of Seifer Yeats Mills & Zwierzynski LLP, Portland.

BALMER, J.

This case requires us to determine whether claims based on breach of contract and quantum meruit must go to arbitration under an agreement between the parties to arbitrate certain matters. Industra/Matrix Joint Venture (plaintiff) initiated this action, seeking $2.6 million in damages from Pope & Talbot, Inc. (defendant). Plaintiff later filed a petition to compel arbitration and to abate the action pending arbitration. Defendant opposed that petition and also filed a motion for summary judgment asserting that plaintiff was statutorily precluded from commencing either litigation or arbitration because plaintiff was not properly licensed by the Oregon Construction Contractors' Board (CCB). The trial court denied plaintiff's petition and granted defendant's motion. On appeal, the Court of Appeals reversed and remanded, holding that plaintiff's claims were arbitrable and that legal issues related to plaintiff's claims, including the CCB license issue, should be decided by the arbitrator. Industra/Matrix Joint Venture v. Pope Talbot, 200 Or.App. 248, 113 P.3d 961 (2005). We allowed defendant's petition for review and now affirm the decision of the Court of Appeals.

I. FACTS

We take the facts from the Court of Appeals opinion and the record. In March 2000, Matrix Service, Inc. (Matrix), an Oklahoma corporation, and Industra Service Corporation (Industra), a Washington corporation, signed a "Joint Venture Partnership Agreement" to form plaintiff. The joint venture's limited purpose was to enter into two contracts with defendant for the construction and installation of piping and mechanical equipment at defendant's pulp mill in Halsey, Oregon. At all times during the performance of those contracts, Matrix and Industra individually held licenses from the CCB; plaintiff, however, did not.

Both construction contracts contain an identical set of "General Conditions" (GC), three of which — GC 5, GC 27, and GC 35 — are relevant here. Under GC 5, the contracts provide for an "Engineer" to be "the interpreter of the requirements of the Contract Documents and the judge of the performance thereunder by both parties." Accordingly, "[c]laims, disputes, and other matters in question relating to the performance of the Work or the interpretation of the Contract Documents shall be referred initially to the Engineer in writing for a decision[.]"1

Under GC 27, respecting "Claims," plaintiff is required to "immediately notify the Engineer in writing of any occurrence which * * * has caused or might cause, a substantial delay in the progress or completion of the Work." Additionally, if plaintiff "believes that the alleged delay was occasioned for reasons beyond [its] control, [plaintiff] may also submit a claim to the Engineer to compensate [it] for such delay." The engineer is then required to review the claim and if, in the engineer's opinion, the claim is "justified," issue a work order to cover the cost. If either plaintiff or defendant disputes the engineer's opinion, then "the validity of the claim will be determined by arbitration." GC 35 relates to "Disputes and Arbitration." It provides, in part:

"Differences between the parties to the Contract as to the interpretation, application, or administration of this Contract or any failure to agree where agreement between the parties is called for (herein collectively called the `Dispute') which are not satisfactorily resolved in the first instance by a decision of the Engineer pursuant to the provisions of GC 5 — Engineer shall be settled in accordance with the provisions of this General Condition."

GC 35 further provides that, if the party raising the "Dispute" disagrees with the engineer's decision under GC 5, then that party may give "written notice to the other party" within 30 days of receiving the engineer's decision that the party "requires the Dispute to be settled in accordance with [GC 35]." After receipt of that notice, the parties are required to "attempt to resolve the Dispute by agreement[.]" If they are unable to do so, either party may "refer such matter to arbitration for resolution," provided that the dispute "is not excluded from the application of arbitration by [six enumerated exceptions.]" That arbitration requirement and the only one of the six exceptions that the parties assert is relevant here provide as follows:

"Except for disputes between [the parties] relating to:

"* * * * *

"35.5.6 The damages to which either [party] may be entitled at law on account of a breach of the Contract by the other of them;

"all disputes between [the parties] which are not settled satisfactorily either by the Engineer or by the agreement of [the parties] shall be resolved by arbitration in accordance with the following procedures[.]"

Finally, the "procedures" enumerated in GC 35 provide, among other things, that "The Arbitration Act of Oregon, for the time being in force, shall apply to any arbitration hearings."

Due to various problems encountered during construction, plaintiff did not complete the project until after the scheduled completion date, and both parties incurred unanticipated expenses. Each party contends that the other is responsible for the delay and the resulting expenses.

II. PROCEEDINGS BELOW

In December 2001, plaintiff initiated this action for breach of contract and quantum meruit. Plaintiff alleged, among other things, that it had "incurred additional costs and expenses" due to "major delays and inefficiencies in performing the work" caused by defendant's failure to perform under the contracts. Quoting GC 27, plaintiff also alleged in its complaint that the construction agreement between the parties provides that the validity of its claims "`will be determined by arbitration.'"

Subsequently, the parties engaged in discovery in preparation for trial. On January 3, 2003, plaintiff filed a second amended complaint, seeking $2.6 million in damages — the amount that plaintiff claimed that it had expended in labor, materials, and equipment ($5 million) reduced by the amount that defendant had paid to plaintiff ($2.4 million) — and a petition to compel arbitration and to abate the action pending arbitration. See former ORS 36.310 (2001) (providing procedure for party to seek court order compelling arbitration); former ORS 36.315 (2001) (authorizing court to abate action of issue referable to arbitration).2 On January 17, 2003, defendant filed a motion for summary judgment on the grounds that plaintiff's claims were barred by ORS 701.065(1) because plaintiff did not have a valid CCB license at the time that it had bid on or entered into the contracts or continuously while it had performed the work.3

In support of its petition, plaintiff argued that its claims were subject to arbitration under GC 35 and were not excluded by the one relevant exception for "disputes * * * relating to * * * damages to which either [party] may be entitled at law on account of a breach of the Contract * * *." Further, according to plaintiff, because the parties' agreement involved interstate commerce, the Federal Arbitration Act (FAA), 9 USC sections 1 to 16, applied, which required the entire matter to go to arbitration. Plaintiff contended that the provision in the contracts that referred to the Oregon Arbitration Act (OAA) governed only the procedures for the arbitration hearing itself.

Defendant responded, first, that plaintiff had failed to satisfy two conditions precedent to arbitration: (1) obtaining a CCB license as required by ORS 701.065(1), and (2) submitting its claims to the engineer for initial review and determination as required by the contracts. Claiming that the contractual reference to the OAA governed all arbitration matters, defendant argued that Oregon law required the court to determine whether plaintiff had fulfilled those conditions precedent to arbitration. For that proposition, defendant relied on Moresi v. Nationwide Mutual, 96 Or.App. 61, 64, 771 P.2d 301 (1989), rev'd on other grounds, 309 Or. 619, 789 P.2d 667 (1990) (applying state law; "`conditions precedent' are matters for judicial determination when they involve the conditions that the parties agreed on about access to the arbitral forum"). Second, defendant argued that plaintiff was not a "party aggrieved by the failure, neglect or refusal of another" to perform under an arbitration clause, former ORS 36.310 (2001), because plaintiff had not made a written demand for arbitration in accordance with GC 35 of the contracts. Third, defendant argued that plaintiff had waived its right to demand arbitration by filing that request more than one year after it had filed a civil action against defendant and by taking advantage of judicial discovery procedures not available in arbitration.

The trial court denied plaintiff's petition in a letter opinion. The trial court agreed with defendant's threshold argument that the contractual reference to the OAA required the application of Oregon law to all arbitration matters and not only to the procedures for the arbitration hearing. Turning to the substantive issues, the trial court agreed with the first two of defendant's...

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